2019 (9) TMI 860 - AT - Income Tax

Profit rate determination - non production of books of accounts - HELD THAT - Assessee failed to produce books of account before any of the authorities below and whatever claim was made, has not been substantiated through any evidence or material on record. Therefore, authorities below were justified in estimating the income of assessee by applying higher profit rate. Considering the smallness of the total turnover of the assessee and nature of business of assessee, it would be reasonable and proper if the income be assessed by applying profit rate of 8% as against 12% applied by the authorities below. Thus confirm the finding of fact recorded by the authorities below to estimate income. However, direct the assessing officer to modify the application of profit rate by applying profit rate of 8% against total receipts of ₹ 58,43,303/- and compute income of assessee accordingly instead of 12% - Appeal of the Assessee partly allowed.

Summary

Issues:
Assessment based on non-filing of return and contractual payments; Failure to produce books of account, bills, and vouchers; Justification of income estimation at 12%; Applicability of penalty for non-audit under section 44AB; Challenge of addition before CIT(A); Assessment based on profit rate; Confirmation of addition by CIT(A); Appeal before ITAT; Modification of profit rate for income computation.

Analysis:
The appeal was filed against the assessment order for the assessment year 2010-11, where the assessee had received contractual payments but had not filed the return of income. The assessing officer reopened the assessment as the income from contractual payments had escaped assessment. The assessee, engaged in running stage carriages, disputed the assessment, claiming not to have received amounts from certain entities and challenging the penalty for non-audit under section 44AB. The assessing officer assessed the income at 12% of total receipts due to the non-furnishing of books of account, bills, and vouchers.

The assessee contested the addition before the CIT(A), arguing insufficient opportunity to present evidence and the high 12% profit rate. However, the CIT(A) upheld the addition due to the absence of produced books of account, bills, and vouchers. The assessee's counsel reiterated the submissions, highlighting the lack of time given by the assessing officer and the non-examination of bills and vouchers. The Departmental Representative supported the lower authorities' orders.

Upon review, the ITAT found that the assessee failed to produce books of account before any authority, leading to the estimation of income at a higher profit rate. While confirming the income estimation, the ITAT directed the assessing officer to apply a profit rate of 8% instead of 12% due to the nature of the business and the total turnover. The ITAT partially allowed the appeal, modifying the profit rate for income computation.

In conclusion, the ITAT upheld the findings of the lower authorities regarding income estimation but adjusted the profit rate for a more reasonable assessment. The decision balanced the need for accurate assessment with considerations of the business size and nature, providing relief to the assessee while ensuring proper income computation.